$25 Billion Mortgage Settlement Is Just The First Step Toward Cleaning Up Mortgage Mess

There are a lot of good things about today’s $25 billion settlement between the five largest mortgage servicers, the Dept. of Justice and the attorneys general of 49 states. But in spite of the huge price tag on the deal — which could grow even larger if other lenders sign on — it’s only the beginning of cleaning up the aftermath of housing market collapse.

While the settlement will help reduce mortgage amounts and mortgage payments for around one million homeowners who owe more than their homes are worth, it only affects privately held mortgages serviced by the five lenders involved in the settlement. The settlement also only covers loans issued during a limited span of time, even though a number of toxic mortgages were issued before 2008.

Additionally, more needs to be done to make it easier for homeowners with high-interest loans to refinance at more today’s record-low interest rates.

“Millions of American families have lost their homes or seen the value of their homes disappear because of fraudulent foreclosure practices,” said Pamela Banks, senior policy counsel for Consumers Union. “This settlement represents an important down payment toward assisting struggling homeowners and holding banks accountable for foreclosure abuses. But clearly much more work needs to be done to ensure banks are held liable for their misdeeds and homeowners hurt by unfair mortgages practices get the help they need.”

While the settlement prevents the states from pursuing civil charges against the five lenders — Ally, Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo — it leaves the door open to criminal investigations.

In addition, banks can still be prosecuted for their role in the nation’s financial crash. President Obama recently named New York Attorney General Eric Schneiderman to investigate how risky mortgage backed securities contributed to the collapse of the economy.

“Americans are still waiting for financial institutions to be held accountable for their role in causing the biggest financial downturn since the Great Depression,” said Banks. “Now, more than ever, we need a vigorous investigation so that the culpable are held accountable and there is meaningful relief for homeowners.”

It includes this nugget: “That $26 billion is actually $5 billion of bank money and the rest is your money. The mortgage principal writedowns are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401 (k)s. Refis of performing loans also reduce income to those very same investors.”

Fannie & Freddie are EXCLUDED from this settlement, so if your mortgage is owned by them you are not in the group of direct beneficiaries. (only indirect, as it’s hoped that this will help the housing market).

Yeah, I think that article that HB quoted is a bit inaccurate (it is an OpEd piece, after all). Supposedly only mortgages that were fully carried by the bank and not backed by Fannie and Freddie are eligible.

Kamila Harris, California’s AG, was just on a NPR interview and she is claiming that California has been guaranteed 18 billion for it’s homeowners. The other 7 billion will be split between the other 48 that signed onto the settlement. Somehow, I don’t think that this is accurate.

I’ve tried to verify this via both left and right news sources, and there are no details of how the money is being split between the states.

it is. The fraud steers bought a blanket release from any further liabilities, including criminal for $25 billion. And most of the money is coming out of investor pockets, not the banks, and certainly not the individuals who run the criminal conspiracy that is the too big to fail banks.

Dayum greedy @$$ banks took my house when I only owed $12,000 after I lost my job. The govt should have let them FAIL! Phuque those banks! Burn in hell Washington Mutual. Burn in hell! And take Wells Fargo with you.

Cant get a loan when your unemployed. Cash advance is the worst thing you can do. And why would I want to burden my friends and family with my own problems? I know they would have helped but I have never asked anyone for anything other than compassion.

They are greedy because you owed money and couldn’t pay it back, so they held you to the contract you signed? $12,000 is a lot of money. I’d take the collateral if you didn’t pay me too. You should have gotten the rest of the money after they got their $12,000. So it isn’t like you lost everything.

Actually I DID loose everything. After the FOURTH mortgage company in less than a year ended up with my loan they sold it for the pay off and sued me for the market difference of depreciation. I had to file bankruptcy or pay an additional $26,000.

and I never said I couldn’t pay it back. I said I lost my job. I was still making payments even though unemployed. I applied for a mortgage modification and once they saw I was unemployed they started foreclosure proceedings because I “didn’t qualify” after I had been on the program for 6 mos prior. So YES, GREEDY BANKS!

@Sisterfunkhaus; How many years have this been discussed and you still do not get it? Give up already because you’re financially challenge, among other things. How many times do people have to explain things clearly before you get the point of what happened?

That doesn’t make a lot of sense for any lender. It’s like borrowing somebody $50,000 for a $30,000 car. what happens if you bail and don’t pay? Now they have to sell a car that was originally valued at $30,000 and make even less. If they DID do this, you can bet the rates would be much much higher, not lower.

When did you take out your loan, and who is it through? The HARP 2.0 act is currently in effect and you will be able to refinance with a lower interest rate right now with your existing lender. Once March 1st rolls around you can move your loan to someone else.

This only applies to Fannie and Freddie backed mortgages though, you need to have taken out your mortgage by May 31, 2009 and not be behind on payments.

It would seem that taking the position that people signed a contract and should be held to that contract is going to be somewhat unpopular.

Be right back, yelling at auto dealer that my car is no longer worth what I paid for it and I’m upside down on the car loan, so they should lower the price of the car and write off the difference, as well as give me a better interest rate.

In some ways it is. I can walk into a dealership with poor credit and get a loan for more than 100% of the price of the car so that I can finance tax and registration with it. If one then fails to make their payments, regardless of how much is left on the loan, the lien holder can then come and repossess the car.

When it comes to the housing problem it is a two way street. Perhaps the banks shouldn’t have lent to certain people, but perhaps some people should not have purchased homes or perhaps purchased less of a house. Both sides were taking advantage of the system.

And for those that keep complaining that the taxpayers bailed out the banks, most of the big banks were strong armed into taking that bailout and have since paid it back. The government made a pretty good return on its investment.

In the meantime I will keep paying the mortgage on my depreciating asset and continue to live in that asset without the threat of foreclosure.

Until 2008, purchasing a house meant acquiring an asset that would appreciate over time. As you paid off your mortgage, the value of your house would increase, and when you eventually decided to sell, your asset would net you a profit. This was one of the basic principles that drove the entire market.

In contrast, no one in their right mind believes that a car is an asset that will appreciate. It’s something that begins losing value the moment you drive it off the lot. For you to go back and argue with a dealer because your car lost value is patently absurd.

Seriously though, unless a bank literally threw you personally out of the house that you were fully paid up on, no one here has a reason to complain. A lot of people bought overinflated assets, that’s just life sometimes. It sucks but that’s just part of the difficulty in properly placing a value on anything.

No one forced anybody to buy a house. There was always renting. There was always buying LESS ‘house’. People wanted to buy as much ‘house’ as possible as they assumed it would always go up and thus the more they risked, the more they would automatically gain. Oops.

Buying less house would have been key for so many people. I know several people who bought way more house than they could afford during the boom. They have run up credit cards b/c they can’t afford their payments and “need” the cards to survive–especially after pay cuts they didn’t allow for b/c they bought at the top amount the qualified for at the time instead of being conservative and thinking about what could happen in the future. Now they whine about how unfair the housing crisis is as though they played no part in it. With the people I see having issues, this is more often the problem than not.

I bought exactly the right “amount” of house for my earnings and needs. But the value has dropped 40% because several neighbors in my condo complex have foreclosed, short sold, etc. Is that my fault? Why do I get penalized and trapped into a house with a mortgage much higher than the fair market value of the condo?

Yes, a home is an investment, and yes, investments change. If I could go back in time a few years, I would have rented an apartment and never bought. I can’t. But it’s a real kick in the junk to get punished for trying to make your money work for you, rather than “throw it away” on rent.

That was the EXPECTATION of some people, not some guarantee. “Investments” are always a risk. And, it’s pretty arguable whether a house is a good investment (or if it has ever been.) You can find financial experts on both side of the argument.

I bought in 2000 and knew that a house really shouldn’t be seen as a cash cow investment. After you pay interest, you end up paying about double what you purchased it for. Then, with improvements and upkeep over the lifetime, you have spent tens of thousands of dollars beyond that. At that point, I’m not sure exactly where the profit comes in since after 30 years, I would have spent around $340,000 on my $125,000 house (basing maintenance on the very conservative 3% per year suggested by many experts. This does not include the ever popular $50,000 kitchen makeover, etc… This is just basic stuff) I certainly can’t imagine that a 30-year-old house, should I sell it, would bring much more than $300,000, since in has no updates and the trends in my area don’t point that way and never have (Mine was originally purchased for $75,000 when it was built in 1975, I purchased it for $125 in 2000, so the price did not double.) Let’s not forget that there will be a real estate fee for the sale that will eat up about $15,000, plus whatever closing costs and concessions I have to pay for the buyers. After that, I still have to find a new house. Since I am now left with less than the $300,000 that my house sold for b/c of fees and whatnot, I just got priced out of paying cash in my own market and have to buy a lesser home unless I want house payments again.

Say I stay in the house until I die. If I bought it at age 30 and die at 80, that is 50 years. So, add more upkeep costs to the house. It’s at about $400,000 that I have spent now. My house is going to be in an old and falling down aging area most likely, and has had no updates at this point since I only figured in basic costs to be nice and not overwhelm you with the real costs. The value has probably started to fall. And, when I die, either my heirs will get the money, or if I spent my last years in a nursing home at the expense of medicare, they will take my house to pay for the difference in expenses.

The best thing a paid for house has to offer is that after 25 years (based on the hikes in rents in my area over the past 10 years applied evenly over 30 years), you break even over renting in my area. That means that if you stay in the house for 30 years, your last 5 years are free if you have not done any updates on the house (add in typical updates and remodeling and it’s not free until 30 years or more.) If you stay in 50, it’s going to cost you about $3000 a year min., which is a pretty good bargain. That is the only scenario in average America where a house is an investment. It’s an almost free place to live after about 25-35 years. It may be a hell hole in a bad neighborhood by that point, but it’s almost free nevertheless.

I think the general principle – that a contract is a legally binding agreement entered into willingly by both parties with an understanding and acceptance if the risks and obligations – applies to both. I’m willing to listen to arguments to the contrary, but I haven’t heard any yet that have convinced me otherwise.

I’m not trying to be snarky, but I bought my house with the understanding that the housing market could, as it has done before, go to shit. And I also understoof that happened I’d be SOL. Why are these folks any different?

It’s the execution that is key, and why none of this really matters until the banks are actually willing to do what they say they will without making up lies and making customers do corkscrew backflips thru flaming hoops. Our courts can rule/settle whatever they wish but until someone can actually force the banks to enact and produce results get ready to play the same old “we never received your documents” game.

Just look at HAMP, it sounds great coming out of Obamas mouth, but when the banks can continue to tell borrowers that they did not send in the correct papers therefor the review was denied and they must start again what is the point?

Why believe anything different will happen this time around?

Until someone actually takes control of the way these banks are operating nothing will change. It goes way beyond the robosigning and bad loans, the real issue is the banks dragging their feet in EVERY step. It doesn’t help that Freddie Mac pays bonuses to the banks for just collecting the packet that needs to be reviewed for modification. Banks get easy money, they collect a packet, notify Freddie Mac and get their bonus and then turn around and tell borrower packet was incomplete, mod denied. Way to enable the failure. Ok Im done with my afterwork vent, but damn dealing with these horrible companies all day is sickening to see how they operate.

Basically, it means you were a sucker. You should have taken out a jumbo loan or a 2nd mortgage at 10-0% down, variable interest rate, with a 5-year balloon, on much more house than you could ever possibly afford. Then, you should have whined and bitched and moaned about how you were taken advantage of, and how your McMansion is now only worth half of what you borrowed to pay for it, and how the federal government should bail you out.

If you were one of those people, congratulations. Here’s your free house. At least, part of one, anyway.

If you were an honest person who worked hard, saved up the traditional 10-20% down, took out a conforming mortgage and bought only as much house as you could reasonably afford (after taking into account taxes, insurance, interest, utilities, maintenance, etc., and the payments should only be about 25-30% of your monthly take-home) and have been diligently making payments on time every month, you were an idiot.

Essentially, nothing. You’re still going to be trapped in a money sucking monstrosity that you won’t be able to unload for years without losing a ton of money.

Otherwise, the banks will keep screwing people over and very few people will receive any sort of relief, certainly not enough to undo the damage done. But some investors (including a lot of 401ks) will take a bit of a hit.

But the banksters get their blanket immunity from prosecution, so it’s all good.

I’m really tired of all the posts crying about how “I did everything right, so where is my share”, or “no one is taking responsibility for their own faults”. This isn’t about personal responsibility, it’s (or should be) about the millions who tries to take the responsibility and work through the issues.

How many of us spent months/years trying to work out a deal with banks that did nothing but screw us? It’s not about who should have received a loan, it’s about the banks lying, cheating, and changing the rules on a daily basis.

Yes, the paperwork was received, but than placed in the trash bin. My home avoided foreclosure with a short sale, so I probably wont qualify. (former) homeowners that were screwed by banks with these kind of tactics should be compensated as well.

Thank you…I agree with this so hard. As to the vitriol aimed at these people, do you honestly think they’re happy with their current situation? That they wouldn’t be happy to switch places with someone who is able to continue paying their mortgage without refinancing? It’s not like they’re getting showered with lollipop rainbows kisses.

Those people made a choice to buy a particular home, at a particular price. Those people made a choice to sign paperwork that said they agreed to that price, and they made a choice to sign paperwork that said they agreed to borrow X amount to cover that price. They signed their name to the contract. They gave their word.

Now, do I feel bad that these people made poor choices? Sure I do. I wish they hadn’t. Do I feel sorry for them, having dealt with less-than-scrupulous people to get the money? Of course I do; stupidity in any form is painful to watch and elicits my pity.

Do I feel that these people should be absolved of their commitments? That a magic “make it better” wand should be waved and that we should all pretend that these adults never made those choices? HELL NO. This is the real world. You made your decisions. You live with the consequences. Sometimes those consequences include being less than comfortable. Sometimes they mean having to buy used cars, or taking the bus, or walking. Sometimes it means giving up your dream home and renting a small apartment, or moving in with relatives.

This life isn’t one of “I’ll happily accept the consequences of my actions, as long as they’re pleasant”. In this life, you deal with the outcome of your choices, good AND bad. And you get through somehow. People have been doing it for hundreds of thousands of years. You’re not a bunch of special little snowflakes.

“This life isn’t one of “I’ll happily accept the consequences of my actions, as long as they’re pleasant”. In this life, you deal with the outcome of your choices, good AND bad. And you get through somehow. People have been doing it for hundreds of thousands of years. You’re not a bunch of special little snowflakes.”

My main point is…..have the banks accepted the consequences of their actions????????
many seem to miss the point that banks screwed customers out of the option of making choices. They decided not to work with their mortgage holders, EVEN WHEN the govt said they were obligated to after receiving the bailout funds. All they banks did was blow smoke up everyones arses.

Whether the banks were good or bad here is IRRELEVANT. I don’t care if you borrowed money from St. Peter, or from the Devil himself. The relevant point here is that an adult put pen to paper and agreed in writing to a set of terms and conditions. THAT MEANS SOMETHING. At least, it used to. Time was, people actually walked around with self-respect, rather than their hand out. Who you borrowed money from, and under what conditions, doesn’t mean crap in this conversation. Nobody held a gun to anyone’s head to sign the mortgage papers. If they can afford a $300k, $400k, $600k, $800k house, they can afford $250 or so to have a lawyer review the documents and explain them using small words and short sentences, and pictures if necessary. They can afford $5 for a calculator from Wal-Mart to figure out how much of their monthly paycheck will go to paying for the agreement they’re about to sign on to.

Let me be quite clear: I do not give one whit who the lender is, or what the lender did. At the end of the day, it was all written on a stack of documents which these “adults” signed, signifying their agreement to abide by what was written in those documents. As soon as that event occurred, any fuck I may have been motivated to give simply vanished. Can’t manage to honor your commitment? That’s a damn shame. Deal with hit.

When I worked in retail banking, I had quite a few mortgages, refis, and car loans; about 15-20 a week. In the year that I did this job, I only had one person who READ the documents. One. I had less than a dozen READ the loan note – that’s the biggie folks, it’s the one that says what you agree to do to get the check out of my hands.

When I bought my place, I made a lot of mistakes, just like most first time home buyers. I did, however, read the full document that I was signing. I’d read a copy I was sent before, but I wasn’t signing that one. I read the one I signed. The agent told me this was the first time she’d ever had anyone read the full document, most just read the amount.

How is trying to get the banks to reduce the principal on your loan ‘personal resonsbility”?

I think it’s asking for free money. The bank just loaned someone money to buy a home, the individual buying the home is the one who decided how much to pay. If the house was overpriced at the beginning then it wasn’t the best idea to buy it now was it? You can always point to outliers but the vast majority of the foreclosures were simply because the homeowner could not afford the payments due to some issue that really didn’t have anything to do with anything the banks did.

I didn’t originally seek out a change in principle, just a chance to re-arrange my payments and stay in my house. I did the responsible thing by making a strong effort, finding roommates and taking care of business on my end. Unfortunately the bank did NOT make any effort to keep me as a customer, and in fact did nothing but make promises while blocking the process behind the scenes. EVEN when trying to sell my home via short sale, the bank blocked several offers for no valid reason and refused to work with the realtor in a proper and legally proscribed manner (to the point where she swore off ever doing a short sale again).

Agreed that a large amount of people have issues because of loss of income paired with increase of interest rate, etc. But perhaps a larger amount of people have also been screwed over by the unprofessional and deceptive tactics that I encountered. Bottom line, the banks want to have their cake, eat it, than sell the shit (as ‘special cake’) for an elevated price to someone who doesn’t know any better, all the while they’ve received bailouts from the feds, ramp up banking fees, and squeeze every last cent for the sake of higher management profits……

One tactic to use with a lender who won’t refinance claiming that the house is under water is to remind the lender that they were the ones who determined the initial value for the present mortgage loan. Now unless they’re willing to admit that the valuation was bogus, they shouldn’t be able to claim that the criteria on which they loaned the borrower the mortgage loan don’t continue to apply. It’s a stretch IMHO but at least it makes the lender justify the lending criteria it used when the loan was made.

Why would you assume that the initial valuation was bogus just because the value has changed now?

A home could be worth $1,000,000 in 2007 and then $500,000 today. Why couldn’t it? It certainly is if someone actually paid $1,000,000 in 2007 and then no one will buy it for more than $500,000. Fair market value is just the price that a buyer and seller meet at.

I’m not suggesting that fmv doesn’t change. What I am suggesting is to put the lender on the spot of justifying the original mortgage. If the borrower simply continued making payments, the lender would not care and unless the borrower is seeking a mortgage reduction (which was not evident from the postings I read), the lender should be bound by its original valuation. All the borrower is really doing is asking for an interest rate reduction. The same way values have declined, interest rates also have declined. It seems like that there’s a least a basis for the argument.

I’m not suggesting that fmv doesn’t change. What I am suggesting is to put the lender on the spot of justifying the original mortgage. If the borrower simply continued making payments, the lender would not care and unless the borrower is seeking a mortgage reduction (which was not evident from the postings I read), the lender should be bound by its original valuation. All the borrower is really doing is asking for an interest rate reduction. The same way values have declined, interest rates also have declined. It seems like that there’s a least a basis for the argument.

“Additionally, more needs to be done to make it easier for homeowners with high-interest loans to refinance at more today’s record-low interest rates.”

Why? Didn’t they sign on and agree to the higher interest loans? Why should banks miss out on mortgage interest because someone bought the home at the wrong time or agreed to a loan they couldn’t afford so they could buy more house or get into a house they might should have skipped? I am rarely on the side of big business, but in this case, no one forced people to sign up for high interest home loans. Companies shouldn’t be forced to make-up for someone’s bad buying decision/irresponsibility. The terms of the loan are spelled out in the paperwork. I’ve bought a house. I read through every bit of my paperwork before signing anything.

In Canada, we are so cocky about the state of our financial system. Just wait, our “Canadian Mortgage and Housing Corporation” is the equivalent of America’s Fannie Mae/Freddie Mac. The difference? Our CMHC puts taxpayers DIRECTLY on the hook. Supposedly we haven’t had a price bubble, excessive debt, or subprime lending. Yet we’ve given NINJA loans, 40 year amortization, 0% down, predicated on 2 or 3% rates; we’ve got 176 condo builds in Toronto (double NYC, which is four times the population) and a Price:Income ratio of 6 or 7; our Debt:Income ratio is close to 160% which is higher than America’s. Oh yeah, and that ignores the fact that we DID bail out our banks to the tune of billions, we’ve just hidden it through media obfuscation (at the pleasure of our powerful bank and real estate lobbies). Welcome to Con-ada.

Ummm… The huge price tag?!? Are you kidding me?! These crooks inflicted trillions of dollars worth of damage to the economy, and the only penalty that they pay is $25 billion.

Let’s see… That’s less than $500 million, on average, per state + District of Columbia.

It’s less than $85 per man, woman, and child in the United States.

It’s $5 billion per bank. An absurdly tiny fraction of the money they made off perpetrating this fraud.

And we will never know the truth. No investigations were done. No one is going to jail. No one is being held culpable besides bank shareholders who may see a slightly smaller dividend next quarter

This is a purely, blatantly criminal whitewash. $25 billion in hush money.

This is an embarrassment. If there was any doubt that the rule of law is dead, this removes it. If there was any doubt that our entire corpo-political system is thoroughly, completely, blatantly, and unapologetically corrupt, it is gone. The criminals who run our government and corporations are laughing at us.

I agree 25 Billion is quite light for the criminal activity that ransacked the economy. But just like a person getting mugged unless you stop and do something and/or avoid that neighborhood the muggings will continue. The enabling boom home buyer did nothing to challenge the exhorbitant home prices. They stood idly buy robo signing these mortgages/contracts agreeing to those outlandishly overpriced homes. Enough people pay the higher price it becomes the norm just like those who let the local gangster intimidate.